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The Top 10 Business Issues Facing Marketers in China

Members of the US-China Business Council Cite Red Tape and the Economy as Biggest Problems

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WASHINGTON, D.C. (AdAgeChina.com) -- Each year, the US-China Business Council (USCBC) surveys its members on their priorities when doing business with China.

This year's survey was conducted in June 2009, when global economic data still looked bad, so the economic downturn,unsurprisingly landed high on the list, followed by human resources.

The survey also revealed that few U.S. companies have benefited directly from China's stimulus package, though some are profiting from the general recovery of China's economy.

Many respondents reported that China operations are more profitable than their company as a whole. Although U.S. companies have seen the recession's impact in China, the country has remained a bright spot for companies in the midst of the global slowdown.

Familiar business problems in the mainland remain unresolved, however. Below is a list of the top ten issues facing businesses in China.

1. Administrative licensing, business, and product approvals
The virtually endless licensing and approval process remains a constant challenge in China. Companies' global business models are geared toward leveraging China's market scale, but their ability to implement those plans is hindered by bureaucratic barriers to expansion and a load of paperwork.

Half of this year's survey respondents indicated no changes this year; more than 30% reported that the situation had deteriorated or new problems arose.

2. Economic downturn's impact on China operations
Since the global economic downturn began after the 2008 survey, respondents weren't asked last year about the impact of the global recession on their companies' operations in China. This year, 64% reported deterioration or new problems.

3. Human resources: Talent recruitment and retention
Finding and retaining qualified employees in China has been a recurring problem for USCBC members. The issue has been at or near the top of USCBC's annual survey for the last four years.

4. Competition and overcapacity in China's market
Competition and overcapacity in China is another recurring issue, with 86% of respondents indicating either no changes or deterioration.

U.S. companies in many sectors retain a significant technological edge, but the ability of Chinese companies to draw on support from local officials and national domestic policies that encourage "indigenous innovation" and national champions helps them gain market share.

Also, the ease of getting financing for domestic companies from state banks—coupled with a traditional emphasis on investing in fixed assets to drive economic growth -- contributes to almost chronic overcapacity in many industries.

5. Market access in services
China's services market is expected to provide significant opportunities for growth, but regulation makes it hard for foreign companies to compete. Sixty-five percent of survey respondents reported that they saw no progress in market access in services in the past year, and 22% of respondents reported that the situation had deteriorated.

New regulations on express delivery are of particular concern, but existing rules that favor domestic companies and restrict foreign investment remain a problem in areas like financial services and healthcare.

6. Standards and conformity assessment
The vast majority of 2009 survey respondents isaid that standards development did not improve over the last year. Most respondents were fairly evenly divided between seeing no changes (33%) or deterioration (38%).

Twenty-one percent of respondents said they experienced new problems. One respondent put it bluntly, "We are concerned about [the] trend toward China-specific technical standards that favor domestic companies."

7. Developing sales and distribution channels
Most respondents -- about 70% -- said they saw no changes in this area in 2009, probably because of the the global economic recession. But some companies saw prospects for growth—15% cited improved development of their sales and distribution channels over the previous year.

8. Enforcement of intellectual property rights (tie)
IPR enforcement—a long-standing challenge for USCBC members -- continued its slow drop in the rankings, but the issue remained a top concern. Almost 70% of respondents noted no changes in IPR protection in the past year. Most of the remaining 30% noted some improvement, continuing a signs of progress over the last four years.

USCBC members attributed that in part to Chinese companies beginning to seek protection of their own rights—a positive sign.

8. Transparency (tie)
Transparency covers the full extent of a country's regulatory process, including drafting new rules and seeking public comments, government decision-making on policies and licensing, and the availability of information on costs and markets.

Transparency concerns are also related to a host of other issues that affect companies' daily operations, such as administrative licensing, uneven enforcement, standards, IPR protection, and investment policy.

While almost 60% of respondents saw no progress on transparency in the previous year (with respondents noting particular difficulty in getting information on China's stimulus package projects), 27% reported improvement since 2008.

9. Protectionism in China
Half of the respondents cited deterioration in the fight against protectionism in China, but 36% said the situation was unchanged.

This special report is based on a study conducted by the US-China Business Council (USCBC), publisher of the China Business Review, which first reported the results in its November-December 2009 issue. For the full report. see www.uschina.org.